Flat White

The terrible truth about hydrogen

16 November 2021

3:07 PM

16 November 2021

3:07 PM

The idea of using hydrogen in the energy industry is not a new one, but only in the last two years has it enjoyed interest, investment and media attention sufficient to catch the eye of the general public. 

There are two ‘visions’ of hydrogen under consideration. The first is the ‘green hydrogen’ idea, in which hydrogen is made using electricity. Hydrogen is a versatile fuel – it could be used in vehicles, in industrial plants, in domestic appliances, or even in generators that return the energy to the electricity market. Though the technology for each of these exists, the infrastructure does not, except for one: if it is blended with natural gas, hydrogen can be supplied into the existing gas network. 

Skepticism about the technology itself is common, but mostly over-stated: 

Hydrogen explodes! Of course it does, it would make a rather useless fuel if it didn’t. But like all fuels it can only be burned when in contact with air. Hydrogen has different properties to natural gas, which will alter the risk profile a little, but the difference is not unmanageable—we deal with stored energy and hence the risk of explosion every day when we use gas, petrol and even batteries, but we don’t freak out because we do it safely. Hydrogen is no different. 

Hydrogen leaks! Well, it’s a gas, and yes it gets through tiny gaps easily, but it isn’t magic. Hydrogen-filled airships stored hydrogen in cotton balloons and they made it across the Atlantic without deflating. If you leave a hydrogen cylinder in storage, it could still be holding pressure decades later. 

Hydrogen damages metals! This is true, a process called hydrogen embrittlement reduces a material’s resistance to cracking – but it doesn’t reduce it to zero; the steel doesn’t become like ceramic. It is expected that some high-pressure pipelines will have to be de-rated before they can take hydrogen; but our lower pressure network is unlikely to require any serious modifications. For some perspective, steel pipelines are also used to transport ‘sour’ oil and gas, which puts hydrogen into the steel at over 100 times the concentration that hydrogen gas does. In the past, the use of “towns gas” made from coal which contains a significant portion of hydrogen, was common throughout the world. Even today, the Hong Kong gas supply is 50% hydrogen. 

Hydrogen is inefficient! There is a fair point to be made here, but even on this item – don’t be too hasty. The efficiency of hydrogen depends entirely on what you are going to do with it. When you first make green hydrogen, an efficiency of up to about 80% is achievable. After that, every transfer or process will further decrease the net efficiency. However, just about every energy supply chain you can imagine is “inefficient”. We are victims of the second law of thermodynamics no matter what source of energy we use. Some natural gas in use today has been taken out of the ground, processed, compressed, moved through pipelines, refrigerated, shipped, evaporated, compressed, moved through pipelines again and finally combusted to make electricity that is transferred through wires and used to run a television. How much of the original energy makes it to the end of that chain, do you think? And yet it is worth doing. 

Judging efficiency is rarely intuitive, and it is pointless unless compared to an alternative that delivers the same benefit in the same context. Compared to natural gas, hydrogen is indeed inefficient to compress or liquefy or store, but if it can be made close to the end-user, then that may compensate for these issues. Energy efficiency is also not the only relevant factor – energy density, weight, material availability, scarcity, infrastructure, transition pathways etc are all relevant. Ultimately, the  way to account for all these is “cost”. Cost provides the right basis for comparison, which is how economists consider the issue. 

On the issue of economics, however… 

Hydrogen isn’t economic! Correct. Or as my colleague optimistically puts it, hydrogen is a “pre-commercial” technology. When weighing the factors, it is difficult for me to envisage hydrogen becoming the main medium through which we transfer energy – the “hydrogen economy” as they call it. But I can see hydrogen playing a part. 


Green hydrogen turns electricity into fuel, and the economics depends on the price you pay for the electricity, and the price you can charge for the fuel. If you consider the average cost of electricity from the cheapest renewable generators, you won’t find an easy path to pay for electrolysis. But if you consider the spot price, then the math changes. 

In South Australia, for instance, where wind and solar account for a large portion of generation, the price of electricity is volatile; it goes negative most days and reaches over $300 several times a week. In June, the electricity price on the east coast reached the maximum permissible price (about $15,000) for about six days in a row due to low wind conditions at sunset. If you buy your electricity at a negative price, or even a zero price, then electrolysis is easier to pay for. Green hydrogen could become economic if the cost of electrolysis comes down a bit (and there’s a lot of potential for that to happen). Additionally, for the stability of the network, wind and solar generators are often ‘curtailed’ – that is, they are turned off even though they are capable of generating; at those times, the cost of supply direct from those generators could be lower than the spot price. 

The price volatility in the market represents a physical reality. Electricity is unique among other markets because at any one time what is being produced and what is being consumed are equal. There’s no “buffer” between the supplier and the consumer. The only buffers are upstream of the generators – the piles of coal, the tanks full of diesel, and the pipelines full of gas. Solar and wind energy, however, have no storage and only supply electricity. They may be cheap when they’re there, but they make everything else more expensive when they aren’t. 

Providing storage and helping to stabilise a volatile market are two benefits that green hydrogen could provide. In this function it has to compete with batteries, pumped hydro and a range of other types of storage, for which it has both advantages and disadvantages. Batteries involve obscure materials and once they’re full, they’re full. Electrolysers also involve obscure materials, but they can keep generating hydrogen provided you have somewhere to put it. Unfortunately, however, hydrogen takes up a significant volume and has a negative effect on a material’s resistance to fatigue (accumulating damage due to pressure cycling). Though hydrogen is made from electricity, it doesn’t have to be returned to electricity – it can be used as a fuel directly, and that advantage may also make a difference compared to other storage technology. 

The intent of ‘green hydrogen’ is to enable expansion of renewables. Wind and solar are currently trapped in the electricity market. Those who desire renewable wind and solar to account for an increasing portion of our energy usage have to either use electricity for more of our energy demand (hence, the push for electrification) or help renewables extend their tentacles out of the electricity tent (hence, hydrogen). Those two ideas are fiercely competing at the moment. 

Either way, the gap these greenest ambitions face is much larger than most people think – currently, we have scattered windfarms and panels across our country from coast to coast, so that renewables account for about 20% of our electricity. But electricity itself accounts for only 20% of our energy usage, so renewables account for only about 6% of our total energy consumption. And, we export more than twice as much energy as we consume, so renewables account for only about 2% of our energy production. Australia would need 50 times as much renewable generation to match its current energy output without fossil fuels. 

That is the real question that must be answered – where will this energy come from?  

For green hydrogen, the idea is that the energy comes from the non-dispatchable, electricity-generating renewables, wind and solar. Is it reasonable to expect an expansion of solar and wind of this magnitude? If we exploited all our solar and wind opportunities, would we even come close to the anticipated output? 

The second vision of hydrogen is blue hydrogen, in which the energy comes from fossil fuels. This idea is simple: effectively it means taking the fossil fuels out of the ground, but leaving the carbon behind. Just as green hydrogen is a renewables enabler, blue hydrogen is a carbon capture and storage (CCS) enabler. The only motivation for CCS is mitigating climate change, because there is no natural revenue stream from burying CO2. Which is why I don’t personally care for the concept; I’m not a climate alarmist, and blue hydrogen is not renewable – it still involves taking energy from a finite supply that is depleted through use. From my perspective, that is a step backward, not forward. On a practical note, there are many opportunities for CCS that would be pursued before blue hydrogen becomes worthwhile – most natural gas comes out of the ground mixed with CO2 any ay. It makes sense to start by burying that CO2 before extracting it from the fuel itself and de-valuing your product in the process. 

There is a third energy source that is not given sufficient attention, and it’s the largest source of renewable energy used in Australia today. Not wind, not solar, not hydro. It’s biomass. Historically, from firewood to whale-oil, all our energy really came from the sun via biological machines; even fossil fuels are part of that, they’ve just been buried for a while. Using solar panels to make hydrogen imitates this, but will we ever be as efficient as a plant?  

Plants make fuel and make it in useful, dense forms that can be stored.   

At the least, we should benchmark the performance of all our renewables against nature. In the UK, Drax have been converting coal power stations to wood-chip fired generators. When you remember where wood comes from, that makes Drax’s power stations the largest solar generators in the world. They provide dispatchable electricity and their supply will increase in efficiency as CO2 levels increase, because trees love CO2. Hydrogen may have a role to play, but of all renewable technologies, I find it easier to envisage biological solutions answering the call for large-scale energy supply and storage. 

The political history of ‘climate change’ in Australia is activists presenting the government with a problem that has no known solutions, complaining when they don’t solve it, and claiming that something very like socialism would have fixed it by now. (In fairness, socialism probably would stop climate change, because poor people don’t emit much.) 

Yet suddenly a lot has changed in the business and political landscapes, resulting in significant action on hydrogen, CCS and other renewable-related technologies. This is mysterious, because one thing that hasn’t changed in the last two years is the underlying science. 

So what is currently motivating the energy industry? Well, a carbon tax may be off the table, but there is plenty of regulation by stealth; EPA approvals for new projects have already been requiring carbon offsetting. Secondly, fear of regulation can be as powerful as actual regulation. Mandatory reporting of emissions is already required, using equations that the government writes. These can turn into mandatory limits at the stroke of a politician’s pen and banks aren’t keen on financing in that context. The federal government is building the Kurri-Kurri gas power plant by itself, because no private sector players were willing to step up. Thirdly, other countries are asking for it; Japan, in particular, has a vulnerable energy supply chain and would love to buy our sunlight if only there was a way for us to move it. But perhaps the most significant current factor is activist investors and board members. Superannuation companies own 40% of the ASX and this has reached a tipping point. Your money is granting them power with no accountability to pressure companies into doing non-commercial green projects. 

Whatever the cause, the fever is spreading. Even the billionaires are beginning to line up with quirky ideas, pretending that deep down they’re all Elon Musks (and is that a bad thing? A bit of insanity at the top end can drive genuine innovation). I expect that this initial fire will probably die back to a sensible warm glow; when that happens, will we have seen genuine transition, or will we look back on it like a fading fever-dream that never really made sense? Like the CCS fever 15 years ago, which never amounted to anything. 

I don’t know what will happen. But I do know that the energy industry has never been static. It’s easy to take a knee-jerk negative reaction to our government’s action on renewables, but I’m not so pessimistic. The technology roadmap is not a socialist wet-dream like the ‘green new deal’ – it’s probably the least bad way to pursue renewables; and last week, they resisted pressure to commit to unnecessary controls of methane emissions, so they’re not ideologically possessed.  

On one hand, I think our government does have insufficient scepticism of current proposed solutions. On the other hand, the technology roadmap is like “calling their bluff”. The green advocates have been saying for years that we could solve the problem tomorrow if we just work together. Ok, if that’s the case, here’s your chance. Prove it. 

Nick Kastelein is a Christian and a conservative who grew up and lives in Adelaide where he works for an engineering consultancy.

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